Texas, Ohio, and Pennsylvania to create the state-level Bitcoin reserves. What are these bills
If the strategic Bitcoin reserve is not created while the state-level reserves are successfully set, they may get a leading role in the exploration of the governmental accumulation and storage of Bitcoin and turn into international cryptocurrency hubs. If all the bills fail, new ones will follow
Three of the 50 states of America are expected to create local Bitcoin reserves soon. The bills differ from the proposal of the American National Bitcoin Reserve and demonstrate local specifics.
America is bullish on Bitcoin. Allegedly, each fifth American owns some BTC. While the U.S. President is pushing to create a strategic Bitcoin reserve, the states are working on local reserves. The Ohio and Texas proposals to create such reserves are about to pass; Pennsylvania is following their way, while other states are doing their considerations.
The local bills of Texas and Ohio don’t include direct intentions to purchase a specified amount of BTC in a certain period, nor are they intended to eliminate the state debts.
The Texas bill was introduced by Texas State Representative Giovanni Capriglione on Dec. 12. The bill suggests that local residents will be able to use cryptocurrency to pay their taxes. On top of that, Texans will be able to donate cryptocurrency to the state. All the crypto is going to be exchanged for Bitcoin.
Donations, taxes, and other payments to the state agencies will be the main avenues for Texas to accumulate bitcoins. The accumulated BTC are supposed to be stored offline untouched for at least five years. Just like Lummis, Capriglione mentioned inflation as one of the biggest enemies while speaking about the need for the Bitcoin reserve. Texas has been an attractive place for Bitcoin miners due to low electricity costs and various incentives.
During the CNBC interview released on Dec. 24, Centrifuge general counsel Eli Cohen noted that the implementation may turn out to be challenging. He points out that the tax authorities may find it tricky to collect taxes in BTC and identify taxpayers. If the tax authorities demand taxpayers to provide their BTC wallets, the taxpayers may feel reluctant to obey.
On Dec. 17, the rep. Derek Merrin introduced the Ohio bill known as the Ohio Bitcoin Reserve Act. The act suggests that the Ohio treasury will set up the Bitcoin fund and will be able to invest money in Bitcoin. Bitcoin is seen as a hedge against USD devaluation. In contrast to the Lummis proposal, the bill has no mention of specific Bitcoin purchases or allocations. In 2022, Ohio had a $72.16 billion debt. It is possible that the BTC reserve could facilitate debt redemption. The bill will be worked upon further by legislators in 2025.
The Pennsylvania bill was introduced back in November. Its prime suggestion is that the state will be able to invest up to 10% of the State General Fund in Bitcoin in order to fight inflation. This means that nearly one billion dollars can be spent on bitcoins.
Will these bills pass?
The bills mentioned above were introduced. There is no guarantee that they will pass. On average, only 20% of the introduced state-level bills become laws. In Texas, Ohio, and Pennsylvania, this number is even lower. According to the New Healthcare Bill Acts, only 4.5% of the bills introduced to the 115th Congress became law. So, statistically, the odds are not that high. Practically, it depends on multiple factors, not least of all the persistence of the lobbyists. Cohen believes that Lummis is a strong Bitcoin advocate with decent experience, and her bill has a good chance.
However, the Lummis Act can fail in Congress. It receives some criticism even within the crypto community. For instance, a passionate crypto writer Nic Carter, warns that while the Bitcoin stockpile (as a store of seized bitcoins) can be beneficial, the strategic Bitcoin reserve (as a reserve of the bitcoins acquired by the government) will not bolster the dollar price (like it is supposed by the strategic Bitcoin reserve advocates) but will do the opposite.
The reason is clear: giving Bitcoin a monetary role in the country that issues dollars is signalling the move away from an inconvertible fiat standard, i.e., questioning the dollar’s value, hence risking the role of the U.S. in the global economy. We can’t state, however, that Carter’s concerns are the current mainstream. Quite the opposite.
If the strategic Bitcoin reserve is not created while the state-level reserves are successfully set, they may get a leading role in the exploration of the governmental accumulation and storage of Bitcoin and turn into international cryptocurrency hubs. If all the bills fail, new ones will follow.
